EPA Issues Direct Final Rule to Allow Rescission of Step 2 PSD Permits

On May 7, 2015, EPA adopted a direct final rule, “Prevention of Significant Deterioration Permitting for Greenhouse Gases: Providing Option for Rescission of EPA-Issued Step 2 Prevention of Significant Deterioration Permits,” 80 Fed. Reg. 26,183, amending the PSD rules to allow rescission of so-called “Step 2 PSD” permits after the Supreme Court’s decision in Utility Air Regulatory Group v. EPA. The direct final rule builds upon an earlier EPA guidance memo, “Next Steps for Addressing EPA-Issued Step 2 Prevention of Significant Deterioration Greenhouse Gas Permits and Associated Requirements,” that had concluded a rule change was necessary. The new rule allows EPA and delegated agencies to begin rescinding Step 2 PSD permits effective July 6, 2015 upon demonstration by applicants.

ANALYSIS

This rulemaking is limited to Step 2 PSD permits. Sources that obtained an EPA-issued Step 2 PSD permit (e.g., a permit issued by an EPA-region or an EPA-delegated state or local permitting authority) are authorized to seek rescission of the Step 2 PSD permit from July 6, 2015 until September 5, 2016. The rule did this by revising 52.21(w)(2) into three subdivisions, two of which are new and read as follows:

Any owner or operator … who holds a permit for the source or modification may request that the Administrator rescind the permit or the portion of the permit if the permit … was issue:

…

(ii) Under § 52.21 between July 1, 2011 and July 6, 2015 to a source that was classified as a major stationary source under paragraph (b)(1) of this section solely on the basis of potential emissions of greenhouse gases, which were defined as a regulated NSR pollutant through the application of paragraph (b)(49)(v)(a) of this section as in effect during this time period; or

(iii) Under § 52.21 between July 1, 2011 and July 6, 2015 for a modification that was classified as a major modification under paragraph (b)(2) solely on the basis of an increase in emissions of greenhouse gases, which were defined as a regulated NSR pollutant through the application of paragraph (b)(49)(v)(b) of this section as in effect during this time period.

80 Fed. Reg. at 26,189. EPA also added a new (w)(3) which limited the right to rescission if the source meets the applicability criteria at 40 CFR 52.21(b)(49)(v) (“anyway” PSD sources).

An applicant for rescission must demonstrate that it meets either 52.21(w)(2)(ii) or (w)(2)(iii) (both reproduced above). EPA also cautions that it will not rescind a PSD permit that contains conditions applicable to non-GHG pollutants unless the source can demonstrate that it has otherwise satisfied any minor NSR permitting obligations and that the source can demonstrate that the GHG conditions are not being used to satisfy “other” permitting requirements, such as an efficiency requirement in the PSD permit also used for minor NSR purposes. EPA notes that consultation with state and local authorities is likely required before rescission can be granted.

Finally, EPA notes that it will consider a separate rulemaking to allow rescission of errors in PSD permits to avoid the need for future, case-specific rulemakings.

COMMENTARY

This rule implements the EPA guidance released in December 2014. It exemplifies the agency’s cautious, grudging approach to rectifying errors and disclaims any agency responsibility to identify permits or permit conditions requiring rescission after the Supreme Court decision in UARG. Permittees are on notice that the burden falls to them to remove any illegal permit conditions. On the bright side, EPA does commit to considering a future rulemaking allowing rescission of PSD permits that contain errors—a long needed step.